"In transactions secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs last." Keiran v. Home Capital, Inc., 720 F.3d 721, 725 (8th Cir.2013) (internal citations omitted), petition for cert. filed, 82 U.S.L.W. 3383 (U.S. Dec. 9, 2013) (No. 13-705). "If the creditor fails to make the required disclosures or rescission notices, the borrower may rescind beyond the unconditional three-day period, but that 'right of rescission shall expire three years after the date of consummation of the transaction.'" Id. at 726 (quoting 15 U.S.C. § 1635(f)). Bank of America, NA v. Peterson, 746 F. 3d 357 (8th Cir. 2014).
TILA is designed "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. § 1601(a). Together with its implementing Regulation Z, and under specified circumstances, TILA requires disclosure by the "creditor" of, inter alia, the "'amount financed,'" id. § 1638(a)(2)(A), the "'finance charge,'" id. § 1638(a)(3), and the "number, amount, and due dates or period of payments scheduled to repay the total of payments," id. § 1638(a)(6), as well as rescission rights, see id. § 1635; 12 C.F.R. § 226.23(b)(1). "The term 'creditor' refers only to a person who both (1) regularly extends ... consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness...." 15 U.S.C. § 1602(g). Crawford v. Franklin Credit Management Corp., 758 F. 3d 473 (2nd Cir. 2014).
The TILA rescission provisions set out the following sequence of events for pursuing rescission: First, the obligor must notify the creditor of his intention to rescind, id. § 1635(a); then, within 20 days after receipt of notice of rescission, the creditor must return to the obligor any security interest, id. § 1635(b); and lastly, "[u]pon the performance of the creditor's obligations under this section [i.e., upon return of the security interest], the obligor shall tender the property to the creditor." Id. These procedures "shall apply except when otherwise ordered by a court." Id. Merritt v. Countrywide Financial Corp., 759 F. 3d 1023 (9th Cir. 2014).
Notably, "[t]he sequence of rescission and tender set forth in § 1635(b) is a reordering of the common law rules governing rescission." Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1140 (11th Cir.1992) (citing 17A Am.Jur.2d Contracts § 590, at 600-01 (1991)). Specifically, "[a]lthough tender of consideration received is an equitable prerequisite to rescission, the requirement was abolished by the Truth in Lending Act." Palmer v. Wilson, 502 F.2d 860, 861 (9th Cir.1974). "Under § 1635(b)," consequently,
all that the consumer need do is notify the creditor of his intent to rescind. The agreement is then automatically rescinded and the creditor must, ordinarily, tender first. Thus, rescission under § 1635 places the consumer in a much stronger bargaining position than he enjoys under the traditional rules of rescission.Williams, 968 F.2d at 1140 (internal quotation marks and alteration omitted). By reversing the traditional sequence for common law rescission claims, TILA "shift[s] significant leverage to consumers," consistent with the statute's general consumer-protective goals. Lea Krivinskas Shepard, It's All About the Principal: Preserving Consumers' Right of Rescission under the Truth in Lending Act, 89 N.C.L.Rev. 171, 188 (2010).
At the same time, consumer protection is not the only goal of statutory rescission under TILA; "another goal of § 1635(b) is to return the parties most nearly to the position they held prior to entering into the transaction." Williams, 968 F.2d at 1140. Balancing the two goals, the case law construing TILA has long recognized courts' equitable power to modify the statutory rescission process. See id. at 1140; Palmer, 502 F.2d at 862. Congress confirmed this equitable role for courts overseeing TILA rescission proceedings when it amended TILA in 1980 to clarify that the § 1635(b) sequence of procedures "shall apply except when otherwise ordered by a court." See Truth in Lending Simplification and Reform Act, Pub.L. No. 96-221, § 612(a)(4), 94 Stat. 175 (1980), codified at 15 U.S.C. § 1635(b). Merritt v. Countrywide Financial Corp., ibid.
THIS CASEBOOK contains a selection of 31 U. S. Court of Appeals decisions that analyze and interpret provisions of the Truth in Lending Act. The selection of decisions spans from 2011 to the date of publication.